US authorities filed insider trading charges against two Indian entrepreneurs for allegedly gaining a million dollars from the proposed merger of India's Apollo Tyres and Cooper Tire and Rubber in 2013.

The Securities and Exchange Commission (SEC) filed a complaint against private equity investor Amit Kanodia and his friend Iftikar Ahmed, a partner of Oak Investment Partners firm in Connecticut.

Kanodia, a graduate of University of Massachusetts and Ahmed, a graduate of Harvard Business School are facing criminal and civil charges filed by the SEC and Attorney's Office for Massachusetts. While insider trading sentences are usually less severe, they could still face a USD 5 million fine and a maximum of twenty years in jail because of the fraud.

According to the SEC complaint, Apollo agreed to acquire Cooper Tire in June 2013 for USD 2.5 billion. But two months before the merger of Cooper Tire and Apollo was announced to the public, Kanodia learned of it from his wife, the general counsel of Apollo that time. He then allegedly shared the confidential information with his friend Ahmed who went and purchased Cooper Tire shares.

After the deal was announced, Cooper Tire's stock price increased by 41%. That's when Ahmed apparently liquidated his Cooper Tire stocks and gained over USD 1.1 million. Deep Blue Publications Group LLC discovered that the proposed merger did not materialize anyway due to legal disputes between the two firms in December of 2013.

The SEC also claims that Kanodia received a kickback of USD 220,000 which was paid by Ahmed via a supposed charity organization of Kanodia called the Lincoln Charitable Foundation.

Kanodia's legal counsel told Deep Blue Publications Group LLC that his client is going to assert his innocence and will not plead guilty. And while any representative from Ahmed's camp cannot be reached, a spokesperson from Oak confirmed that he is placed on leave of absence.